Venezuela Promises to Pay Airlines What They Are Owed

31 Mar 2014

In the wake of mounting flight cancellations and international criticism, Venezuela has agreed to pay airlines the $3.8 billion dollars it currently owes. The Venezuelan Airline Association announced the change last Friday after several weeks of tough talk by the Maduro administration.

Two weeks ago President Maduro claimed the demand for payment by the airlines was part of an “economic war” against his regime. He promised “severe measures” for any air carrier that dared to cut flights to the country. A few days later Air Canada announced it was suspending all flights to Venezuela, citing security concerns. Maduro’s government denounced the decision and appeared to be continuing its tough line with air carriers.

Last Wednesday Tony Tyler, Director of the International Air Transport Association (IATA) criticized Venezuela directly during a speech in Santiago, Chile. Tyler said of the funds “I need hardly remind anyone here that this is not the government’s
money–it is money the airlines earned by providing air transportation to
the citizens of Venezuela.” Tyler added that as a result of the failure to pay “11 airlines operating in Venezuela have reduced operations between 15% and 78%–and a few have ceased flying altogether.”

Two days after Tyler’s speech, the Venezuelan Airline Association announced the government would pay airlines the money it owes them. Airlines sell tickets in the local currency, the bolivar, but in order to take their earnings out the country they are reliant on the government to exchange those funds into dollars.

The central issue has been the exchange rate at which money would be converted to foreign currency. The government set the exchange rate at 6.3 bolivars to the dollar, but in the wake of rampant black market inflation it recently announced a new rate of 11.3 bolivars to the dollar. The air carriers refused to accept this and the government has now agreed to exchange the money at the rate that was current when tickets were sold.